Obamacare insurers need to step it up to compete with Blue Cross

Five of the six insurers on the Illinois Health Insurance Exchange face a moment of truth as they decide whether to continue offering plans on the online marketplace and how to attract more customers.

Their first-year efforts didn't amount to much. Just under 18,000 combined signed up for their plans, compared with an estimated 200,000 enrollees who flocked to plans sold by Blue Cross & Blue Shield of Illinois. The entire state exchange attracted about 217,500 enrollees during the six-month enrollment period, which ended in mid-April. Now the rival insurers are weighing whether to lower prices and redouble their marketing efforts to be more competitive.

For instance, one of the insurers, Chicago-based Land of Lincoln Health Inc. Co-op, captured just 2 percent of Illinois enrollments in Obamacare. More than 3,600 individuals, families and small businesses enrolled, Dan Yunker, CEO of Land of Lincoln Health, said in a statement.

Nevertheless, the co-op, which was created with $160 million in federal loans to stir price competition among insurers on the exchange, is filing plans with the Illinois Department of Insurance for the next enrollment period, which begins Nov. 15. And it is looking at how to woo more customers.

“As a consumer-focused, nonprofit health insurance company, Land of Lincoln Health listened closely to Illinois residents and small businesses in development of these plans and expects to be in an improved competitive position with these innovative health insurance products,” Mr. Yunker said in the statement.

BLUE CROSS FOCUSED ON EDUCATION

Representatives for the other insurers declined to offer details on how they would become more competitive. But they may have to copy the efforts of Blue Cross, the state's largest insurer, which focused on educating consumers. Company representatives attended more than 200 community events, launched a health reform website and hosted more than 300 seminars, where they informed and enrolled consumers, said Lauren Perlstein, senior manager of public and media relations at Health Care Service Corp., the parent of Blue Cross.

“This is just the early stages of the battle,” said Leemore Dafny, a professor of strategy at Northwestern University's Kellogg School of Management who studies health care markets.

A spokeswoman for the Illinois Department of Insurance said the deadlines for insurers to submit proposed plans to sell on the exchange in the fall are still being discussed.

The Blue Cross spokeswoman and a spokeswoman for Health Alliance, the insurance arm of Urbana-based hospital network Carle Foundation, said they intend to or are working to file plans to sell on the exchange next fall.

A spokeswoman for Louisville, Kentucky-based Humana Inc. said the company hasn't decided whether to continue to participate. A spokesman for Hartford, Connecticut-based Aetna Inc. and Coventry Health Care Inc., which merged with Aetna last year, said no decision has been made yet either, but that “our bias is to maintain our current footprint across 17 states.”

The spokesman for Aetna and Coventry said the companies enrolled a combined 600,000 people in 17 states. Of those, about 500,000 have paid their first month's premium. Data for Illinois alone were not provided.

Steve Riedl, a Chicago-based senior consulting actuary at Towers Watson, said Blue Cross' dominance likely was because of its competitive prices and reputation. The insurer's average total costs for enrollees was the cheapest or near the cheapest in every category of coverage offered, according to a Crain's examination. Blue Cross already commands more than 60 percent of the market in the state, and only Blue Cross and Land of Lincoln offered plans statewide.

RIVALS NEED TO STEP UP

“Our goal was to expand access to health care in the states in which we operate BCBS health plans,” Ms. Perlstein of Blue Cross said in the statement. “We did this by competitive pricing, expansive product selection, an array of provider network options and our commitment to help consumers manage their health care choices and decisions. All of this made Blue Cross & Blue Shield a popular choice among consumers and we are proud that many consumers have chosen us as their health insurance provider."

Ms. Dafny, of Northwestern, said Blue Cross' rivals will need to negotiate better deals with physicians and hospitals to reduce prices for their plans.

But, paradoxically, they also might benefit from the leading insurer's early gains.

“Blue Cross has the people who are very expensive, who wanted to sign up right away,” Ms. Dafny said. “The average risk of the population that signs up next year may well be a lot lower.”

Additionally, the other insurers and any new market entrants can target the so-called young invincibles. These relatively young people, who typically don't need expensive care, didn't sign up in large numbers this year and are key to balancing out the costly elderly and chronically ill on the exchange.